Method and system for processing financial transactions

Abstract

A method and system for processing financial transactions by receiving a payment transaction as an Issuing Payment Processor, converting the payment into one or more derivative transactions based on a defined rules set, and then sending, as a Merchant Payment Processor, the resulting derivative transaction or transactions to another Issuing Payment Processor, resulting in real-time settlement, faster and less costly implementation of discount, gift, and loyalty programs, and enhanced member credit card security and privacy.

Description

BACKGROUND OF THE INVENTION [0001] Financial credit transactions are typically performed electronically using a Standard Payment Network (SPN) such as the VISA or MASTERCARD financial data network to enable credit cardholders to conveniently purchase goods and services without the need to directly handle money. As a substitute for cash, creditors or banks issue credit cards to cardholders which are presented to merchants during the purchase of goods or services. Each credit card contains a unique credit card number, also known as the Payment System Identifier (PSID), that is bound to the credit account of each cardholder. In the VISA financial network, the PSID is 16 digits in length as shown by the exemplary format “5123 5555 5555 1234.” The first four digits, e.g., 5123, comprise the Bank Identification Number (BIN) which identifies the cardholder's credit source and enables the SPN to electronically route associated payment transactions to the cardholder's credit source. [0002] I...

AI Technical Summary

Benefits of technology

[0034] Certain embodiments protect a member's credit card PSID from disclosure to hackers or criminals when performing on-line financial payment transactions by providing the member with a one-time generated identification number (GIN), i.e., one-time PSID, which is only valid for one particular purchase and then worthless to criminals or hackers subsequently. The member's credit card PSIDs are never exposed to criminals, preventing possible fraudulent purchases using the member's credit cards and potential damage to the member's credit history.

[0035] Whenever a credit card purchase occurs on a financial transaction network, the network operator, e.g., VISA, collects a percentage of the purchase, known as the interchange rate. Certain transactions, where the credit card can be physically verified by the merchant to be in the user's presence or where the user enters a valid Personal Identification Number (PIN), are defined as Card Present (CP) transactions. On-line credit card purchases, where the card cannot physically be verified, are defined as Card-Not-Present (CNP) transactions. The VISA financial network interchange rate for CP transactions is approximately 1.5%, while the CNP transaction rate is as high as 3.5% due to the increased fraud risk of on-line transactions where the card cannot be verified to be in the cardholder's presence. This significantly higher CNP interchange rate results in increased cost to the on-line merchant and, indirectly, to the credit cardholder who pays more for the same product to cover the increased interchange rate.

[0036] Certain embodiments enable a merchant and member to convert a CNP transaction into a CP transaction using a one-time GIN and, thereby, reduce the interchange rate charged by the payment network operator for a particular transaction by up to two hundred basis points. Reduction of the interchange rate from 3.5% to 1.5% results in significant savings directly to the merchant and indirectly to the member.

Problems solved by technology

Data mining, however, is not performed in real-time and not performed with all MPPs.

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